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Maximising resources through co-promotion

Penguines on ice Innovation is frequently cited as the key to success in the pharmaceutical industry but it has usually been applied to the R&D department, rather than marketing teams. The changing industry environment – compounded by the current economic issues – has led pharma to embark on a cost-control programme. In this climate, innovative or 'intelligent' strategies in sales and marketing have never been more critical.

Amid a decline in the number of potential blockbuster products, companies face a fresh challenge: finding ways of increasing the longevity of the product life cycle and fully exploiting their current portfolio in a cost-effective manner. Co-promotion has the potential to create competitive advantage throughout the various stages of the product without demanding a huge marketing budget.

Historical deals
Co-promotion is defined as two companies promoting a product under a single brand name, whereas co-marketing is the promotion of a product under two different brand names.

In the late 1980s and early 1990s, when blockbusters were booming and the threat of generics was in its infancy, larger pharma companies invested heavily in their salesforces and were able to gain a large share of voice.

Co-promotion deals were the choice of small to medium-sized enterprises (SMEs), which do not have access to such large marketing budgets. Usually a smaller pharma company joined forces with a medium-sized competitor so that, together, they could cover the large, and increasingly competitive, US market. With both parties focused on co-operation they were able to use as many sales representatives as possible to maximise revenue. According to Datamonitor figures, almost 60 per cent of co-promotion agreements in the early 2000s had a US focus. Europe was the aim of just one of the 53 co-promotion deals publicised over a 24-month period up to 2003.

The decline in the number of potential blockbuster products, together with recent economic challenges, has resulted in huge reductions in sales and marketing expenditure across the board. Consequently, co-promotion is now up for discussion in companies of all sizes in all geographic locations. There have been 35 co-promotion deals announced in the European press in the past 12 months. These involve firms ranging from smaller biotech to big pharma – such as Abbott and AstraZeneca's collaboration to co-promote the statin Crestor.

Financial incentive
The decision to co-promote is usually a financial one, as both companies seek to increase revenue growth and gain an optimal return from finite marketing budgets. This increases the pressure to allocate funds smartly and effectively, while carefully managing risk. As co-promotion is an economically efficient method of increasing a brand's share of voice in the marketplace, it can access a much wider and diverse target audience.

In the pharma industry, it is a useful strategy to impact all levels of influence and target an audience. This can range from specialist healthcare professionals, such as consultant dermatologists, all the way through to paediatricians, GPs and pharmacists.

It allows the company to tap into the sales and marketing capabilities of industry experts, give the salesforce experience of a new product and expand the coverage in existing territories. Ultimately, a co-promotion deal can generate value, which, in turn, can enhance shareholder returns, making it an attractive strategic and tactical option.

Although the principle of co-promotion is straightforward, the practical implementation is not necessarily as simple. There is no 'one-size-fits-all' approach, as the following case studies demonstrate:

CASE STUDIES

Sinclair and York
The co-promotion agreement between Sinclair Pharma and York Pharma stemmed from an existing relationship between the management teams. The cultural and strategic compatibility of the two companies was well established and the discussions predominantly focused on the commercial aspects of creating a mutually beneficial deal.

Under the terms of the agreement, each company now co-promotes selected products to a healthcare professional target audience, consisting of dermatologists and selected GPs. York Pharma's salesforce co-promotes Sinclair's Atopiclair product for atopic dermatitis, while Sinclair Pharma's salesforce co-promotes certain York Pharma products, such as the QV emollient range.

In setting up the arrangement, both companies were confident that this collaboration would optimise the value of their respective portfolios and accelerate sales growth. The deal effectively doubled the number of specialist salespeople promoting the two companies' dermatology products in the UK.

It also expanded the territorial coverage, both in terms of adding new territories and gaining more coverage in existing territories.

There is good collaboration between the two sales teams. Each member of the combined salesforce is allocated geographically-complementary territories. The marketing plan and the promotional material are developed jointly for the products in question. The salesforces are managed by a dedicated marketing person who is responsible for the implementation of the joint marketing plan. Both salesforces are trained in the other's products, ensuring the reps are clear on the objectives, product information and key messages.

The agreement is based on each company benefiting from the incremental sales of the respective products.

GlaxoSmithKline and Shire
The recently-announced three-year co-promotion agreement between Shire and GlaxoSmithKline (GSK) covers the US for a product called Vyvanse which is indicated for the treatment of attention-deficit hyperactivity disorder (ADHD). As a result of this deal, Shire will more than double the reach and frequency of the current sales effort for Vyvanse by adding more than 600 sales representatives from GSK who call on specialists and primary care doctors.

Shire currently has nearly 600 representatives promoting Vyvanse, primarily to paediatricians and psychiatrists. By collaborating with GSK, Shire can access a salesforce which has an established history and expertise in central nervous system (CNS) drugs, as GSK has two of the most accomplished CNS and primary care sales teams in the industry. It is estimated that Vyvanse will be introduced to more than 70,000 new doctors.

For GSK, the deal makes effective use of its existing salesforce by licensing-in some drugs until the GSK pipeline commercialises a new CNS offering. Apart from the obvious commercial benefits, it also allows GSK's salesforce to continue doing what it does best and secure its reputation in this area.

The agreement is based on profit sharing above an agreed baseline figure.

Salesforce success
The most successful arrangements are those where partners understand each other's objectives and foster a win-win attitude.

When evaluating a partner, it is important to understand at the outset whether the partner organisation's culture, strategy and needs are aligned with your own; the ability to overcome cultural and operational differences will be a key factor. The best results are undoubtedly generated by companies whose two salesforces operate as consultative teams working as one. The greater the collaboration in terms of territory management, co-ordination of sales activities, customer call lists, call details and agreement on messaging, the greater the chance of success.

Salesforce capability and training in co-promotion is also crucial, as the manner in which this is managed will drive the success of the co-promotion and the resulting impact of the deal to both businesses. Both salesforces need to be adequately trained, with each rep being clear on the objectives and key messages. Delivery of mixed messages to the customer can seriously damage a brand's success, and procedures should be in place to ensure consistency.

Failure to do this may result in the customer becoming confused by different messages or even conflicting information. Ultimately, branding and key messaging reinforce the importance of a product in the market and both companies share product branding ownership.

Companies must carefully consider the product mix being presented and the position of the product on the call list to ensure the products are complementary and not conflicting.

Revenue benefits
As pharma companies look for new and innovative ways to drive profitability, co-promotion deals are firmly on the agenda. Co-promotion is now appealing to companies of all sizes, as the decline of sales and marketing resources is an issue faced by all. The need to allocate funds effectively and carefully manage the risk has never been greater. A well-managed co-promotion deal with a carefully chosen partner can generate optimal return on investment, increase a brand's share of voice in the market and ultimately enhancing shareholder value.

The increase in number of new deals demonstrates that the appetite for co-promotion appears to be rising as companies recognise the potential revenue benefits and competitive advantage a well-managed deal can deliver.

The Author
Paul Phull is the managing director for Europe and executive vice-president at Sinclair Pharmaceuticals
To comment on this article, email pme@pmlive.com

14th July 2009

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